Eutelsat Communications S.A. (ETL) Earnings Call Transcript & Summary

Good day, and welcome to the Eutelsat Communications webcast and conference call to comment on today's announcement of our investment in OneWeb. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Rodolphe Belmer, CEO. Please go ahead, sir.

Good evening, ladies and gentlemen, and thank you for joining us on this call regarding our investment in OneWeb. First, look at the key terms of the transaction. We have entered into an agreement with OneWeb to acquire a 24% equity stake for a consideration of $550 million. This investment will be 100% cash funded. It will make us a leading shareholder of the company alongside the U.K. government and the Bharti Group with similar governance rights. We will be the only satellite operator among the shareholders. The transaction is expected to close in the second half of calendar year 2021, subject to customary regulatory authorizations. First, now a quick overview of OneWeb and where it stands today. OneWeb is a constellation which will operate 648 satellites in low orbit, delivering 1.1 terabytes of capacity per second across a truly global coverage. The first generation is expected to be fully operational by the end of 2022, ahead of competition projects. It is expected to be complemented in the medium-term by a second generation, providing significant enhancements in terms of capacity, flexibility and economics. Eutelsat will own 24% of the capital, the same level as the U.K. government and Bharti. Other shareholders include SoftBank and Hughes. This provides a solid capital backing to OneWeb as well as a diversified shareholder base, able to open those to a wide range of opportunities. With this investment, OneWeb will be almost fully funded until the end of the deployment of its first generation. Discussions with potential backers for the remaining low funding to go amounting to EUR 0.5 billion are well advanced. OneWeb comes with several differentiating technical features compared to existing and future capabilities. Its low latency will be a key differentiator for latency-sensitive applications, in particular, cloud or 5G-related. Its global coverage, including the polar region, will allow the delivery of uninterrupted service and access to markets currently untapped by GEO or LEO capabilities. Operating in the polar low Earth orbit 1.2 -- 1,200 kilometers above the Earth's surface, it enjoys a look -- a low-look angle, enhancing the signal reception in all configurations. It's easy to install and low-cost terminals for B2B applications represent also a competitive advantage versus MEO alternatives. And it is a cost-effective solution, in particular, compared with the rollout of terrestrial infrastructure in remote areas. Following its emergence from Chapter 11, OneWeb has successfully reactivated all the technical blocks necessary to ensure it is on track for an imminent entry into service. Satellite manufacturing is assured through the joint venture with Airbus with a production cadence of up to 15 units per week. The launches carried out by Arianespace resumed back in December. The user terminal production and ground infrastructure deployments are also both well advanced. As a result, the system is in its final phase of development and well on track to reach partial coverage from end 2021, end of this year, and full global coverage by the end of 2022, the end of next year. Now turning to the strategic rationale behind this investment. The verticals to be addressed by OneWeb represent a significant opportunity, evaluated at some $10 billion by the end of the decade and growing at a double-digit pace. Fixed data. In this segment, which consists of mobile backhaul, corporate networks and community WiFi, those segments are set to grow at a high single-digit CAGR driven by network expansion, growing data usage and ubiquitous coverage needs, including pressure and telecom operators to deliver a truly universal service. In the government service vertical, notably for military security application, this segment will benefit from rising defense budgets, increasingly bandwidth-hungry usage and the need to connect remote sites for public administrations. And in mobility, this segment will see strong double-digit growth with both maritime and [ in-flight ] to be driven by a rising number of vessels increasingly equipped for productivity while enhanced and cheaper services will lead to higher take-up rates by end users. OneWeb is ideally positioned to be among the winners in the non-geostationary landscape. First, with 6 gigahertz of globally harmonized bandwidth secure from the ITU and the highest priority in Ku-band, I insist on that, OneWeb has strong priority spectrum rights, meaning all of the operators will have the burden of coordination to ensure noninterference in Ku-band. Hence, its operations will be easier to run than some competitors. Second, with a global coverage by end 2022, ahead of any other projects, OneWeb will have an important first-mover advantage. Third, OneWeb's technology is scalable with a second generation plan and to provide more capacity at a significantly reduced cost with enhanced operational flexibility. Fourth, the first generation is almost fully funded with some $5; billion already raised before our investment and limited funding to go of $500 million for which the company is well advanced -- is in well advanced discussions with potential backers. And finally, a global and diversified shareholder base potentially opening market access and commercial opportunities in both mature and emerging geographies. Taken together, Eutelsat and OneWeb represents a unique portfolio of capabilities. The density and high throughput features of GEO resources complements the low latency and ubiquity of LEO coverage. In terms of timing, we bring immediate ramp up capabilities while OneWeb brings additional high potential in the medium term. Commercially, our long-standing relationship with multiple blue-chip customers everywhere in the world will further support the strong traction of OneWeb, which is already in active discussions with over 100 prospective customers. Finally, the combination of our strong institutional relationship across all continents and a diversified investor base of OneWeb can help optimize market access. Eutelsat is ideally placed to help accelerate the development of OneWeb on a number of counts. From a technical standpoint, we will bring a broad range of assets and capabilities, including our in-orbit resources and a robust grown network as well as the skills of our technical teams and our spectrum and regulatory expertise, giving OneWeb access to backup sites and operational capabilities to optimize its ground operations; also giving OneWeb access to additional engineering and procurement know-how to design specifications; also the ability to accelerate market access, notably in terms of landing rights in some geographies, and with the scope to explore the possibilities opened up by the combination of GEO and LEO constellations. On the commercial viewpoint, as mentioned before, our relationships and established distribution network will support the commercial ramp-up of OneWeb. Eutelsat, with its global footprint and strong GEO positions, in particular, in Europe, in Middle East and Africa and in Russia, is a strong complement to OneWeb's already powerful and diverse international shareholder base. The U.K. government, where the space industry is at the top of its agenda and with several ambitious national projects, including Project Gigabit program for remote connectivity and Skynet program for military communications. Bharti Airtel, the third largest mobile operator in the world with over 425 million customers across Asia and African in terms of -- in Africa in terms of necessitating the use of satellite-based connectivity, it's mobile broadband networks and enterprise business will act as a testing ground for OneWeb services. And aside from the 3 leading shareholders, meaning ourselves, the U.K. state and Bharti, OneWeb capital also includes SoftBank, owner of a leading telecom operator in Japan and manager of the Vision Fund, the world's largest technology-focused venture capital firm; and Hughes, the leading U.S. geostationary satellite operator and ground network innovator and a technology and distribution partner of OneWeb. Turning now to the financial review. This investment represents a highly attractive entry point for Eutelsat into the LEO segment in the context where the number of global constellations is likely to be limited to 4 or 6 by regulatory, physical and operational proportional constraints, and the total cost for standalone constellations amounts to at least $5 billion to $6 billion. The timing is ideal given that OneWeb is now almost or is fully funded with around $5 billion already invested prior to our entry. Our investment puts OneWeb in a strong position to receive full funding this year. And operationally, we are in the final steps of its deployment and only a few months ahead of partial entry into service. And of course, and it's very important also, the size of the investment is fully compatible with our financial framework and respects our strict investment hurdle rates. The investment will be 100% cash financed by the upcoming C-Band proceeds and cash on the balance sheet. We expect to receive the full $507 million C-Band proceeds ahead of schedule in fiscal year '22. And we have liquidity of EUR 1.9 billion at end March, EUR 1.4 billion restated for the upcoming EUR 500 million bond maturity. Therefore, there is no need to raise additional debt. In this respect, there is absolutely no change in our policy of stable to progressive dividend and it is fully compatible with our commitment to solicited investment-grade rating. Finally, OneWeb will be accounted under the equity method. Therefore, all our financial objectives are unaffected and are thereby fully confirmed. Finally, OneWeb offers a very compelling economic potential. It can potentially capture the market share in its main verticals of 10% to 20%. Revenues are expected to reach circa $1 billion per annum in the next 3 to 5 years following the full deployment of the constellation expected by December 2022. Its wholesale approach implies high profitability at full speed. In the medium term therefore, OneWeb should be largely self-financing with no additional capital requirements beyond the limited funding to go. And as a result, this investment is compatible with our usual hurdle rate of a minimum IRR of 12%. A few words to conclude. This investment in OneWeb is a major step in our connectivity strategy. We will pursue our policy of maximizing cash flow extraction from our heritage activities to underpin our continued delivery of compelling shareholder returns. At the same time, we will grow our fixed broadband vertical, leveraging the EUTELSAT KONNECT and KONNECT VHTS satellites. OneWeb will become the main growth engine in our non-broadcast and non-broadband applications where the combination of our complementary resources and assets creates significant commercial potential. This does conclude my presentation. Thank you very much for your attention. And I'm now ready to take your questions together with Sandrine Teran, our CFO. I forgot to mention that she is on the line with me today. And our IR team, Cedric Pugni, is with us and Joanna Darlington.

[Operator Instructions] Our first question today comes from Robert Berg of Berenberg.

Three questions, if I can. The first is for Rodolphe. And I'm sorry if I misquote you, but I'm almost certain it wasn't too long ago you were saying LEO constellations are extremely challenged operationally and financially due to number of satellites that have majority of coverage over dead spots and high terminal costs. Again, apologies if I've got that wrong and I wasn't -- you said that, but I'm keen to hear what's changed, if you did say that previously, your mind and where perhaps you may have been wrong with that assessment previously? The second question is the funding to go is broadly the same as what you've invested. I'm keen to hear whether you see yourself getting diluted when the remaining funding occurs. And the third question is, again, it's -- does the business model forecast in second generation is funded by the first? Or will you have to invest further in the future?

Well, on your first question, which is the -- a broad question on our strategy in LEO constellation, we have all -- we have said, clearly, I think -- well, that's the idea we tried to convey that LEO constellation will be critical telecommunication infrastructure in the future. The issue we had until now with LEO constellation was more of a financial issue. As I said in my few words of presentation, the cost of a LEO constellation, the kind of OneWeb but it's also the case for the other projects, is in the order of $6 billion. And of course, it's totally out of reach for us. It's too expensive. All the more that in the first years of operation, it's uncertain yet whether this kind of investment can find a decent payout and even more an internal rate of return which is consistent with our standards and our objectives. The reason why we were interested by OneWeb is that what would be different because of the Chapter 11. The Chapter 11, which has wiped out -- which has erased, I don't know what was to pick, $3.5 billion of investments gives us a unique point of entry into OneWeb at a cost which is totally compatible with our financial capabilities and also with a cost that is compatible with the generation of a decent rate of return. And that's exactly why we were also so excited to participate into OneWeb because of the cost of entry, which was enabled by the financial restructuring of the company, and we had this unique occasion to enter as a minority but very significant shareholder, and at the same time, to enter in the company at a very low entry price for us. Your second question is true that there is still some funding to go as we put it, which is in the order, I said, of $500 million. It's certain that we might be diluted from this round of additional -- small round of additional funding and probably a stake post that round should be in the order of 20%.

Okay. And just future funding needs going forward after the first round.

Well, future funding needs, we have, of course, looked at that. There might be additional funding needs. What I can tell you at this stage is, first, we truly believe that, well, the revenue potential of OneWeb is absolutely significant, above $1 billion in the next few years. The rate of return will be above our threshold and our ability to participate in possible funding needs of the company is -- well, doesn't affect in any way the financial strategy and the financial promise of Eutelsat in terms of dividend policy, in terms of the credit rating, meaning that everything is -- well, everything we have to fund above -- well, during the course of the life of OneWeb, we can fund it without any impact on the financial performance and the financial growth business of our company.

Our next question comes from Nick Dempsey of Barclays.

I've got 3 questions left. Just first of all, can you explain why you're receiving your entire C-Band cash earlier than expected? Second question, you focus on government as one area that you're talking about here as an application for OneWeb and then you talk about your heritage business. I mean, I think we all know that your fixed broadband and professional data, this business is likely to decline forever. But are you effectively accepting here that your existing revenue stream in government is likely to decline going forward, given the rise of LEO in the government? And my third question, are the existing shareholders like Hughes, U.K. government, Bharti, are they committing to taking a relevant part of the capacity on OneWeb as part of the whole process, which de-risks the ramp-up a little bit?

Well, thank you, Nick. On the C-Band, actually, we are -- we think that the migration of our customers in the U.S. in the upper side of the C-Band spectrum will be completed significantly before the time milestones set up by the FCC. And we think we have completed the entire migration of all of our sets of customers in the U.S. probably by the autumn, which means that we are entitled to get the entire acceleration premium attached with the migration of our portfolio of customer, 90 days after the completion of the migration, that's the rule of the FCC. And that's why we are truly convinced that we are getting 100% of the signal acceleration premium during the course of our fiscal year '22.

And that's been fully confirmed by the FCC, right?

This has been -- well, it was. In this instance, the authority in charge of confirming the plan is not truly the FCC. It's the relocation coordinator, but -- well, our plan has been validated and we are now executing it. While it's not totally done yet because, well, we are -- we are starting this plan, but given the magnitude of the plan, given how much advanced we are, given the visibility we have with our customers, we are truly convinced that everything will be done, will be completed by the autumn. On your question in the government vertical, well, we -- our objective and our forecast is a slight growth in our government revenues at Eutelsat in the next few years. Why? It's due to the arrival online and the launch of the QUANTUM Satellite, that's a satellite which is dedicated to the government business. On -- in the longer-term horizon, in the longer horizon of time, is our geostationary business in the government vertical threatened by the evident success of OneWeb and the other LEO constellations? We think that it won't be the case. We believe, and that's what -- and that's a view that's informed by the conversation we have with our customers in this very specific segment, that they will continue to need wide beam capacity for specific usage. All the more that many -- the vehicles are equipped with terminals, which are GEO compatible terminals. And they don't intend to change those terminals in the near future. What we think is that while LEO will develop very well and will produce a new and additional set of service for this usage for -- on the battlefield. On the third question, pre-commitments from -- fixed pre-commitments by Bharti and the U.K. gov, well, there is no fixed pre-commitment at this stage. What we know is that there is lots of traction on the marketplace, lots of interest from many customers, including from ours, for OneWeb capacity. As you know, the company is just exiting Chapter 11. It's just revising now. And it is sort of a reborn company, meaning that we are just resuming -- they are just resuming, I say we now, we are just resuming the commercial efforts to sell OneWeb capacity.

Our next question comes from Aleksander Peterc of Societe Generale.

Can you just help me briefly understand? So the first thing, you will actually be a reseller, I suppose, of OneWeb capacity. And is that going to be in all the 3 verticals? You mentioned the fixed data, government and mobility. Will you be integrating your GEO offering and the OneWeb capacity at the same time and kind of mix and match that in a similar way as maybe SCS is also planning to do with their own non-geostational and geostational offering? How is this going to work really? And then the second question is, once the 2 constellations are fully launched by the end of '22, how long are these constellations going to be operational until they'll have to be decommissioned and you have to have a full relaunch of the constellation, again, at a similar cost of $5 billion to $6 billion, I suppose? And then thirdly, could you share any details on the target EBITDA margin that OneWeb can achieve, but it's run rate one is to achieve its EUR 1 billion in revenue? And do you have anything to share on the price of the end user terminal to give us at this stage?

First question on the commercial strategy and on the bundling of GEO and LEO constellation -- well, service signals. First, well, actually, we do intend to leverage our commercial force to leverage our set of relationships everywhere in the world with our -- across our portfolio of customers to accelerate the commercialization of OneWeb capacity. In the long term, the vision is -- the technological vision and the technological ambition is to propose hybrid products to our customers consisting of LEO capacity and GEO capacity. Still, I think that this vision is probably -- will probably materialize in the long-term only and not in the short term, meaning that probably in the first years of life of OneWeb, we will sell other LEO products or GEO products to our customers, meaning that LEO will serve a certain set of usage, will meet a certain set of needs from customers, and GEO will meet another set of needs. While it's true that -- well, the fact that we have a truly global geostationary coverage and now full access to LEO constellation is a unique competitive advantage for the future, but this kind of advantage will be built over time. On your second question, the lifetime of a low orbit constellation. And I think that the implicit question was about the capital expenditure associated with the launch of the Generation 2 of OneWeb, which will replace Gen 1 at its end-of-life and in how much -- across how much years, you need to amortize this investment. First, OneWeb has a lifetime -- expected lifetime which is a bit higher than its competitors since it's expected to be operational during 7 years. At the end of this time or a bit before that, of course, the replacement, which is called OneWeb Gen 2, will be launched. The cost of the Gen 2 is expected. I'm not going to comment more on that at this stage, of course. But you should have in mind that the cost of the Generation 2 is expected to be substantially lower than Generation 1. Why? Because we think that over time, significant productivity gains have been made, meaning that the cost -- the military cost, if I may say so, of the constellation will have dropped materially when we launch the Generation 2. Third question, EBITDA margin. Again, I can't give much details on that question at this stage. It's a bit too early. But what I can reiterate is that OneWeb is addressing the B2B segments and not B2C firstly. Second element, the main -- the vast majority of the capacity, the main commercial strategy would be wholesale, meaning that we have in mind to generate EBITDA margin which are compatible with the B2B business operating under a wholesale commercial model, which means that we are targeting quite substantial, quite elevated levels of EBITDA margin. User terminals, your last question, was the work of OneWeb with manufacturers of users' terminals is very well advanced, very impressive and they are well on track to deliver very competitive products to the marketplace. Again, and even though what I'm going to say doesn't -- well, shouldn't minimize what I said before, but -- and even though OneWeb is pretty impressive in the development regarding user terminals, what I should precise there is that it's less of an important question for OneWeb as it is for others since OneWeb is addressing the B2B market, B2B customers, for which the cost of terminal is less of a barrier of entry -- barriers to entry than it is in purely consumer segments, in pure consumer segments, meaning that, well, in the B2B segment, customers are far less sensitive to the cost of the equipment.

Our next question comes from Michael Bishop of Goldman.

Firstly, I had a question on capacity. How much of the 1.1 terabits per second do you think is actually really sellable capacity? Because my understanding is at least the first generation of OneWeb doesn't have cross-link. So if you could just talk about that. And as a small follow-up to that question on capacity, is it all or nothing in terms of the first generation to the second generation? Or do you think there's ways of boosting the capacity in areas where you've got high demand for the first generation on top of the existing plans? And then my last 2 questions were just around, firstly, around the potential for further investment. You mentioned that OneWeb needs another $0.5 billion of investment. Do you have any indication on whether that will just be sort of normal debt funding or whether, for example, another satellite operator at this stage could also join? And then just a final very quick question on LEOs. You had voiced your support for European LEOs. So could I just presume from today's investment that your focus is OneWeb and not a European LEO now?

The 1.1 terabits per second, Michael, that I referred to is actually the sellable capacity, which means that it's a quite consistent, quite sizable capacity that OneWeb has to sell, even though it's a bit lower than our -- than its main competitor. But well, it's capacity that we judge sufficient, especially at the associated level of CapEx costs, which are in the order of $2.5 billion. We think that it's a very competitive proposition to initiate -- to start up the LEO market. We have cost of production which are relatively low due to the benefits of the Chapter 11, of course, and we have enough capacity to really start this market. Well, on the boost of Gen 1, well, the idea would be to go directly to a Gen 2 and not to boost Gen 1. We think it's a better proposition. It's a better technological strategy given the pace of innovation in the sector at those times. The potential for further investment, the $500 million that I have mentioned, I'm not sure I have totally understood the question. What is certain is that, well, the investors that are [ envisaged ] are mostly financial investors. Of course, there won't be any competing satellite operator alongside with us around the table. It's not something that we would consider positively, and that is possible anyway. Well, I think that does answer your question unless I've misunderstood it. And the last question you had on the European project, we are part of the consortium of companies which are in charge of the configuration of possible projects supported by the -- or led by the European Commission. We continue to be part of that consortium and to help the European Commission analyze the needs in that respect and develop their strategy in that area. And we believe that, well, our commercial initiative with OneWeb might well be compatible with more sovereign European projects. But well, at least what I can say at this stage that will be horizons of time of the 2 projects, of the 2 initiatives are truly different.

The next question comes from Giles Thorne of Jefferies.

My first question is a broad question on capital allocation. Looking at some of the numbers here, Rodolphe, you're investing at a valuation that certainly -- probably towards your current listed valuation. And you're also potentially taking capital away from some of your core projects around fixed broadband in Europe and Africa. So can you just give us some insights into why this was the right set? And the second question is really linked to the first, maybe they're 2 questions or really just one question. Anyway, second question is, commercializing spectrum at lower orbit is still broadly unproven. I've yet to see an unequivocal business case for it. And that indeed talks to the history of OneWeb's recent bankruptcy. So I think everyone on this call will want to know what are the 2 things or 3 things that you've seen in the past year that suddenly makes this a legitimate business case and indeed a legitimate investment? And the third question is just an intriguing question really. The bankruptcy was only a year ago. The U.K. government and Bharti got to invest $500 million and get 42% each and you're spending $500 million and you're getting 24%. So just to challenge your cost of entry being attractive, why are you striking good terms? Why didn't you participate a year ago? Maybe that's the question.

On the first question on the capital allocation, actually we invest around EUR 500 million, $550 million into OneWeb. And we invest mostly, as I said before, our C-Band proceeds, meaning that we are not diverting any investments that we should -- from our core business to redirect it towards OneWeb. Put it in another way, we are not going to reduce our CapEx line at Eutelsat level -- I mean, Eutelsat CapEx line to be able to finance for OneWeb. We can, of course -- because we use that sort of windfall, if I may put it that way, of the C-Band in the U.S., we use mostly that windfall to finance our investment into OneWeb. But even in the future, as I said before, even though we continue to participate in possible funding needs of OneWeb in the first years of its life, we can do that even in the worst possible case without touching the CapEx line of Eutelsat, the profitability of Eutelsat, the dividend of Eutelsat and the credit rating of Eutelsat, meaning that we can do that, it's an additional investment that we can make without affecting anyhow the proposition in any sense of Eutelsat. And in that sense, we believe that investing the windfall of our C-Band into the -- our entry into the LEO constellation space. And put it another way, we think that having the option and transforming this windfall into an option for the future growth of our company is something that is absolutely logical, very -- and a very strong and compelling arguments. And coming to your last question before answering the second one. Well, a year ago, the U.K. government and the Bharti Group entered -- well, took a stake into OneWeb for $500 million. The year after -- and they took a risk for that. They invested these sums at a moment where the company was not totally funded yet and they had to revive the project. A year after, we enter at just EUR 550 million for the same stake, the same position as the U.K. and Bharti, meaning that we are paying more or less the same price, so we have accepted to pay a 10% premium, whereas the project is now almost totally funded and I should say virtually totally funded, meaning that, well, the level of risk that we take at this stage is extremely low. The product is funded. Well, it's almost operational. It will start service at the end of this year, just well -- it's just around the corner, and that's why we think we had a very good entry price. But the argument I wanted to make when I said that we had -- with the price was not really in reference to the price paid by the U.K. states or by Bharti Group. It's because we entered the company after EUR 3.5 billion have been erased by the chapter -- that we paid only a fraction of the actual cost of the -- capital cost of the constellation. And that's why -- that's the essence of why this case is so financially compelling for us. It's an option that we pay at a very low cost, which gives us full access to a LEO project, which will be one of the first and only LEO projects in the world at the moment. Well -- and this brings me to your second question. We believe that LEO constellation in the future, in the medium term, will be very important infrastructure for telecommunications. Why? The essence of the connectivity development that we make is about bringing telecommunication services to areas where traditional telcos don't go. That's the philosophy, that's the principle, that's where the big growth is in the space sector in the next decade and that's exactly why we have first invested in our KONNECT family strategy. But everybody knows that the more time passes, the more telecommunication -- the world of telecommunication is optimized towards low latency. 5G is built around the premise -- technical premise of low latency. And all the cloud-based applications, they are increasingly optimized for low latency. And it means that if you want to benefit from the immense latent demand for telecommunication services of quality in areas not covered by traditional telcos, you need to build -- to bring a proposition that is at least partially built on the promise of low latency because otherwise, you cannot bring 5G-like services or you cannot bring cloud-based application. And that's why -- that's where the business is, at least, well, in every segment, but more importantly, in the B2B segment. And that's why we believe that the value creation in low orbit will be extremely significant. It doesn't mean that it does deny all the value of geostationary satellites, which will be very important to bring high capacity at a very low-cost in concentrated areas in applications not latency-sensitive, like for instance, video streaming, but low latency services, low latency infrastructure will be absolutely crucial. And we think that in the very long term, only those companies with low orbit constellation, and I mean low, not at a higher altitude, only those companies will be able to take the lion's share of the gigantic business that's going to open for telecommunication in remote areas.

The next question comes from [ Ben Lanes ].

It's kind of a follow-up to the previous one where you mentioned that you won't be redirecting capital. But just wondering if there is any impact on CapEx? I know you've got an LEO constellation you're planning to launch. And if you're taking capacity from OneWeb, will you have too much capacity on KONNECT when you're offering broadband? And also another one on the IFC part. There's a nice CAGR of 50% on mobility segment you put in your PowerPoint. But as far as I'm aware, it doesn't exist an antenna where you can connect via LEO or MEO or certainly not small enough to fit on an aircraft. So just wondering if you have any sort of visibility on when these kind of developments in antenna technology will be available?

Well, as I said before, we don't intend to modify our CapEx line at Eutelsat and we'll continue to invest in the order of below EUR 400 million per year to finance for our geostationary constellation. Well, 60% of that is for maintenance, meaning that, anyway, it's unaffected by OneWeb. And the rest is mostly, as I said before, for broadband. We have stopped investing in fixed data geostationary assets. And normally -- typically, we don't really invest in mobility, geostationary assets. We have made an exception for the E10B satellite because we think that there is a shortage of capacity in the geostationary arc for the mobility market over Europe, but except that very specific case, as you have noticed and different from most of our competitors, we have not invested in the mobility segment, in the geostationary satellites. And the reason is that because we think that in the long term, 2 big business will remain in geostationary technology: That's television, of course, television broadcast; and second, that for a part of the market, the broadband to consumer segment. And that's why we have invested in the KONNECT satellite. For the other usage, because in many instances, latency is a very -- well, is of significance, we think that low orbit constellations are better fit for purpose, and that's exactly the summary of our strategy. But since our strategy at Eutelsat, I mean, our core strategy is built on broadcast and broadband and we are continuing to do that through geostationary options, we are not changing, in essence, the order of our CapEx line.

Our next question comes from David Strauch of Credit Agricole.

I guess most of my questions have been answered, but I just have a quick one on the rating agencies. You say you have a plan to sort of be able to maintain your dividends and also your investment grade -- solid investment-grade rating. Have you spoken to the agencies about this investment? That really gets to the base of my key question.

Yes, we did. Actually, we have shared our plans and our intentions with our -- with the credit rating agencies. And I think what has been confirmed tonight that our rating standing will be confirmed and maintained. Sandrine, are you on the call to give more color on that question?

Yes, of course. Hello, David. So as you know, we have 2 solicited rating, the first one from S&P. We are BBB- stable with S&P. And the second one is Fitch, BBB stable. So yes, we have informed and discussed with the agencies. And I can already say that S&P has released a note a few minutes before our call confirming that our investment-grade rating was unchanged by this transaction. So it's even public for S&P. And we expect Fitch to issue as well in the next coming days.

Okay. I assume you haven't spoken to Moody's then because it's an unsolicited rating.

Yes.

Our next question comes from Roshan Ranjit of Deutsche Bank.

Great. Just one quick follow-up for me, and just circling back to quite a few of the points made earlier. And it's around the fixed broadband side. Now you've obviously signed quite a few wholesale agreements with a number of the telcos and it's still a big growth driver ahead. I think previously you are in discussion with a number of other telcos still. I think one where was previously in talks with BT for rural coverage. I don't know if that agreement has been signed. But I guess my question is, how should we think -- I mean, it's quite clear that you're suggesting that it's quite transferable between the GEO and the LEO format, but what -- how should we think about the pricing difference? Because, again, trying to put some numbers onto it. I mean, you previously said the wholesale agreement with Orange, TIM and [ I thought is ] EUR 450 million for 20% of the KONNECT capacity. So that's what, I think, 100 gigabits per second. So how should we think about kind of the unit pricing versus LEO? If it's possible just to kind of put a magnitude on that, that would be super helpful.

Well, Roshan, first, I should say -- probably say that OneWeb strategy is directed towards the -- is oriented towards the B2B segment mostly. It doesn't mean that it exclude the opportunity of selling broadband to consumer, but it's clearly not the core of that strategy. And the reason is that, I think we do believe together with them that the consumer segment is better addressed for the foreseeable future by geostationary solutions because of the cost of the equipment. As you've seen, we have started commercializing our KONNECT services in Europe and we sell the service at -- well, depending on the countries, but if you take that in euro terms, we sell data plans of 5 -- of 50 megabits per second at EUR 50 per month. And typically, the terminal is -- the cost of the terminal is included within the monthly subscription price. And we think that's the price you have to reach to have a compelling value proposition, at least in non-U.S., non-North American countries because the markets in those zones is, well, to market standard -- well, to somewhat market price is at that level for this -- for Internet services in those countries. And with LEO solutions, as you have seen from some of our competitors, the price points they can achieve, even though they are massively subsidized by their institutions, well, the price points they can reach is far above that. It's $100 per month in terms of monthly fee plus an equipment cost that you have to pay and which is in the order of $500. And it's too expensive for the vast majority of the market. It doesn't mean that there is the segment of the market that is not really sensitive -- that is not really quite sensitive, that can take this kind of service, this kind of option, this kind of proposition, but for the back of the market, that's not what the market is. And that's why we believe -- that's the first element. The second element, if you take the market size consideration, which is a very important consideration in an infrastructure business, when you do the math, you realize that the latency market that has to be addressed by satellite, meaning all the areas that are not well covered on all the population that is not well served by traditional telcos, well, this simply represent a latent demand, which is far above -- far bigger than all the production that can be brought by Starlink, OneWeb, Viasat, Eutelsat altogether in Europe and Africa, for instance. It means that there is room for GEO and LEO in that respect. And most probably, LEO, because of the cost structure, will address the high end of the market with higher price and GEO will take the rest, the lower end of the market, with people needing services around EUR 50 per month or that kind of order. But with this kind of pricing in GEO solutions, we do derive very, very good rate of returns.

Okay. That's clear. So I mean, I guess, is it fair to say, I mean, you made the point around the B2B focus. That is one area where we are less likely to see any kind of overlap between the legacy Eutelsat strategy, your position, and this new OneWeb but...

Exactly.

Over time, if we are to see the terminal costs come down, you're confident in that the market is big enough for all the -- for yourself and your competitors to provide the capacity and there'll be enough demand for that capacity?

Correct, correct. It puts it in a much more simple way than what I did.

The next question comes from Sami Kassab of Exane.

Please forgive me if my questions have already been asked, but I couldn't listen to the beginning of the call. I still have 2 questions, please. The first one, can you help me understand if the announcement today is just a minority stake that you're acquiring in OneWeb or whether there is some sort of commercial agreement that gives you the said access to the OneWeb capacity? So my question is, how can Eutelsat benefit from reselling the OneWeb capacity? How it work -- if you have a telco client that wants LEO capacity, what happens then? Do you have preferential terms to access, I mean, the the OneWeb capacity? Can you please help me understand that? And the second question, as you were looking to invest in LEO in the last few weeks or months, were you given the option to invest in Telesat's Lightspeed instead of OneWeb? And if you were given the option to invest in Lightspeed, why did you decide to go for OneWeb instead of Lightspeed?

On your first question, well, the announcement we make today is actually our entry in the capital of OneWeb for 24% of the capital with significant rights attached to this investment, co-controlling right, should I say, in terms of the operations of the company. We are first -- we have first negotiated the terms of our entry with the other main shareholders, meaning the U.K. government and Bharti. And we have left the commercial discussion for later -- for now, I mean, when the deal is done. We thought it was already complex enough discussion not to complexify it more with commercial considerations. The fact is that the spirit, and it's very evident, is that Eutelsat's expertise will be leveraged by OneWeb to accelerate their development. And Eutelsat expertise, meaning technological expertise to help OneWeb in specifying their next-generation constellation. It's, of course, our ground segment expertise, but also, well, our regulatory knowhow and set of relationships in many different geographies, plus -- and I'm coming to the heart of your question, of course, commercial expertise. And we intend to leverage the sets of customers of Eutelsat and the worldwide sales force of Eutelsat to help OneWeb accelerate, and that's in the spirit of our agreement. Even though I must say that nothing precise yet has been negotiated with OneWeb at this stage, it's a work for now that's going to open as of tomorrow. Your last question on Telesat. Well, I don't know how I can answer that question. What I can say is that we have chosen OneWeb because the project is fully funded or almost fully funded, but let's say fully funded to keep it straight and simple. The project is already live, meaning that there are almost 100 satellites in orbit and the constellation will be fully completed shortly. And there are very powerful shareholders, which are open to partner with us and to work with us. And we think that the combination of all that makes the promise extremely appealing, plus the project merits, plus the fact that we have entered at an entry point in terms of price, which is very compelling, we think that the proposition is truly unique. You should also have in mind the geopolitical consideration. With us on board, OneWeb carries the Indian flag, the British flag and the European flag. And it's something that's extremely powerful and extremely current. And for all those reasons, we truly believe that OneWeb is the partner of choice for us and it's truly the LEO constellation we wanted to take the foothold into.

As there are no further questions at this time, I would like to hand the call back to Mr. Belmer for any additional or closing remarks.

Well, thank you. Well, no more remarks on my side. Well, we think it's a truly exciting moment for Eutelsat. We're extremely satisfied to come back to that partnership together with the U.K. government and Bharti to control altogether OneWeb, which opens a new way of growth for Eutelsat and acceleration in our strategic pivot towards connectivity. Alongside broadcast, which is extremely resilient, broadband to consumers that's growing nicely, well, this participation into OneWeb is truly the last leg of our very compelling and attractive return to growth strategy. Well, thanks for your -- for joining us today and more on this in the near future.

Ladies and gentlemen, that concludes today's conference call. We thank you for your participation. You may now disconnect.